Money… fiction?

Cash, credit, debit… these are all terms used to define money, more importantly your money. One would assume that a person would want all their money easily accessible, at hand’s reach one would say but money isn’t all that we think it is. After listening to the NPR broadcast called The Invention of Money, my perception of money and it’s worth has definitely changed.

Initially, I believed that money is what makes the world go round. This statement after careful thought is somewhat true yet invalid at the same time. The broadcasters really get you to think about the concept of money. Money is something that was created to give value to objects. We in America use the dollar bill while in Mexico pesos are used. Regardless where you go some form of currency is used to be exchanged for goods and/or services. According to what was said in the broadcast, listeners are told money is fiction. How can that be so?

While listening, the story of the island of Yap is told. In Yap, it’s residents use sculptures as a form of currency. By sculptures, I am referring to big rocks of limestone. It is implied that this form of money is no different than what we use here in our own country. In the United States, we entrust banks to keep our money secured safely. These banks put our cash in huge vaults underground for storage. Once the process of delivering money to the bank is complete, your bank account balance should go up and one is satisfied with that. How can you be satisfied with something that you cannot see? You ensure yourself that the bank will hold your money safely so you shouldn’t have to worry about it. This is no different from what is done on the island of Yap.

On the island of Yap, residents first started to trade big stones as currency to exchange goods and/or services. One would have to physically move their “transaction” from the home of the buyer to the home of the merchant. This method however grew to be tiresome for many. That’s when an idea was suggested to the people of Yap. Basically what was informed to the citizens of the island was a way to pay for your products without having to physically move the huge stones. If the limestone was kept at the home of the buyer then once he has made a purchase, the ownership of his stone would now go to the merchant but it would remain in the same place. Sound far-fetched? Well it’s not because that’s what we do here in America. The only actual physical item of money would be the cash bills and coins but after the broadcast these bills and coins are as significant as that huge stone leaning on the house of the buyer. Companies make transactions cryptically, it’s done over a computer. Physical money is rarely used in banks unless a member of that bank is making a withdrawal of cash from their account.

As the broadcast keeps ongoing, listeners hear the story of how cruisers from the island were coming back with a limestone that would be given to someone. While at sea, a storm caused the big stone to fall off the ship and sunk to the bottom of the ocean. When the sailors returned to shore and told their story, the people of Yap believed them and said that the big limestone was still valuable and can still be used even at the bottom of the ocean. How can this be? Well someone has ownership of that stone and when they buy something that stone’s ownership would now go to the person who is selling to the buyer. This is a constant cycle of who claims ownership for a giant rock at the bottom of the ocean. This method is ironically used here as well. We keep money in banks and when we need to pay a bill or make any form of payment, most of the time money is exchanged electronically; should that be via credit or debit card. We physically are not giving cash to someone we are actually giving ownership of our money in the bank to another person. While your account balance goes down, the cash money is still in that vault in the bank. Sound familiar?

In Milton Friedman’s article titled The Island Of Stone Money, Friedman gives an insight on the story of the people of Yap from his perspective. He at first found it completely weird that their form of money were big rocks but soon came to the realization that those rocks and our money are actually no different. We do not physically touch our money once it’s in the bank just like how the owner of the stone does not physically touch his money. What really stood out to me from the article was a statement Friedman wrote which said that the “civilized” world made their money from metals that came from the ground, which were then refined at great labor, which eventually was transported to multiple locations and then is stored once again in vaults underground. How is this any different from a very big stone wheel at the bottom of the ocean?

In an article written by Anne Renaut called The Bubble Bursts on e-Currency Bitcoin, Renaut provides readers with the dangers that come along with e-currency and it’s transactions. In her article, Renaut states that “Bitcoin is made of strings of dazzlingly complex code created by a process called mining”. While we have established that paper money, coins, and stones are all of insignificant value, Renaut gives readers a warning about the dangers of e-currency which is what is mainly used in today’s society. She goes on to state that once the virtual money is mined, Bitcoins are stored in the virtual wallet of it’s user. Sending money is kept anonymous which can be dangerous. Renaut calls it a “high degree of anonymity” which is then switched over to how this anonymity can be used as an alternative form of payment for drug dealing and money laundering. Any form of money has it’s advantages and disadvantages but overall I believe the statement that “money is fiction” is accurate.

References

This American Life. 2020. The Invention Of Money – This American Life. [online] Available at: <https://www.thisamericanlife.org/423/the-invention-of-money&gt; [Accessed 21 September 2020].

Friedman, Milton. The Island Of Stone Money. Hoover Institution, Stanford University, 1991. [Accessed 21 September 2020]

Renaut, Anne. The Bubble Bursts on e-Currency Bitcoin. Yahoo! News, AFP News, 13 Apr. 2013, sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html. [Accessed 21 September 2020]